Valley Boys v. American Family Ins. Co.

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
09/18/2020 01:07 AM CDT
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Nebraska Supreme Court Advance Sheets
306 Nebraska Reports
VALLEY BOYS v. AMERICAN FAMILY INS. CO.
Cite as 306 Neb. 928Valley Boys, Inc., doing business as Valley Boys
Roofing, assignee, appellant and cross-appellee,
v. American Family Insurance Company,
appellee and cross-appellant.
___ N.W.2d ___
Filed August 28, 2020. No. S-19-528.
1. Actions: Parties: Standing. Whether a party who commences an action
has standing and is therefore the real party in interest presents a jurisdic-
tional issue.
2. Judgments: Jurisdiction: Appeal and Error. When a jurisdictional
question does not involve a factual dispute, determination of a juris-
dictional issue is a matter of law which requires an appellate court to
reach a conclusion independent from the trial court’s; however, when
a determination rests on factual findings, a trial court’s decision on the
issue will be upheld unless the factual findings concerning jurisdiction
are clearly incorrect.
3. Judgments: Verdicts: Appeal and Error. Review of a ruling on a
motion for judgment notwithstanding the verdict is de novo on the
record.
4. Judgments: Verdicts. To sustain a motion for judgment notwithstand-
ing the verdict, the court resolves the controversy as a matter of law and
may do so only when the facts are such that reasonable minds can draw
but one conclusion.
5. ____: ____. On a motion for judgment notwithstanding the verdict, the
moving party is deemed to have admitted as true all the relevant evi-
dence admitted that is favorable to the party against whom the motion
is directed, and, further, the party against whom the motion is directed
is entitled to the benefit of all proper inferences deducible from the rel-
evant evidence.
6. Contracts: Appeal and Error. The construction of a contract is a mat-
ter of law, in connection with which an appellate court has an obligation
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306 Nebraska Reports
VALLEY BOYS v. AMERICAN FAMILY INS. CO.
Cite as 306 Neb. 928to reach an independent, correct conclusion irrespective of the determi-
nations made by the court below.
7. Contracts: Assignments. An assignment is a contract between the
assignor and the assignee, and is interpreted or construed according to
the rules of contract construction.
8. Assignments: Debtors and Creditors: Standing. A debtor has stand-
ing to challenge an assignment if it can show actual prejudice by the
improper assignment, an injury that is directly traceable to the assign-
ment, such as being at risk for paying the same debt twice, or by other-
wise showing that the assignment is invalid, ineffective, or void.
9. Assignments: Parties. If there has been a valid and complete assign-
ment of rights, then the assignee is the real party in interest.
10. ____: ____. If an assignment is invalid, then the purported assignor
remains the real party in interest.
11. Actions: Parties: Standing: Jurisdiction. The question of whether a
party who commences an action has standing and is therefore the real
party in interest is jurisdictional.
12. Judgments: Jurisdiction: Appeal and Error. Aside from any fac-
tual findings, the trial court’s ruling on subject matter jurisdiction is
reviewed de novo, because it presents a question of law.
13. Contracts. A contract written in clear and unambiguous language is not
subject to interpretation or construction and must be enforced according
to its terms.
14. ____. The court must accord clear terms their plain and ordinary mean-
ing as an ordinary or reasonable person would understand them.
15. ____. Instruments made in reference to and as part of the same transac-
tion are to be considered and construed together.
16. Contracts: Proof. A party seeking to enforce a contract has the burden
of establishing the existence of a valid, legally enforceable contract.
17. Contracts. It is a fundamental rule that in order to be binding, an agree-
ment must be definite and certain as to the terms and requirements.
18. ____. Generally, mutuality of obligation is an essential element of every
enforceable contract and consists in the obligation on each party to do,
or permit something to be done, in consideration of the act or promise
of the other.
19. ____. An agreement which depends upon the wish, will, or pleasure
of one of the parties is illusory and does not constitute an enforce-
able promise.
20. ____. Where the promisor retains an unlimited right to decide later the
nature or extent of his or her performance, the promise is too indefinite
for legal enforcement.
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Nebraska Supreme Court Advance Sheets
306 Nebraska Reports
VALLEY BOYS v. AMERICAN FAMILY INS. CO.
Cite as 306 Neb. 92821. Assignments: Consideration. An assignment is effective only when
supported by valid consideration.
22. Contracts: Consideration. Without a mutuality of obligation, the
agreement lacks consideration and, accordingly, does not constitute an
enforceable agreement.
Appeal from the District Court for Douglas County: Shelly
R. Stratman, Judge. Affirmed.
Matthew P. Saathoff, of Saathoff Law Group, P.C., L.L.O.,
and Larry E. Bache, Jr., and Michael W. Duffy, of Merlin Law
Group, P.A., for appellant.
Joel D. Nelson and Joel Bacon, of Keating, O’Gara, Nedved
& Peter, P.C., L.L.O., for appellee.
Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke,
Papik, and Freudenberg, JJ.
Funke, J.
Valley Boys, Inc., doing business as Valley Boys Roofing
(Valley Boys), appeals the order of the district court for Douglas
County which granted in part judgment notwithstanding a
jury verdict in favor of American Family Insurance Company
(American Family). Valley Boys alleged that American Family
failed to pay the full amounts due under postloss assignments
of insurance proceeds. The court found that eight of Valley
Boys’ nine assignments were unenforceable. We agree, and we
affirm the order of the district court.
BACKGROUND
In the summer of 2014, nine homeowners sustained prop-
erty damage in a hailstorm. The properties were insured under
American Family’s “Gold Star Special Deluxe” homeowner’s
insurance policy, which covered direct physical loss caused by
hail. Eight of the nine policies included an endorsement enti-
tling the homeowner insureds to proceeds for covered losses
determined at actual cash value, or “the amount actually and
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306 Nebraska Reports
VALLEY BOYS v. AMERICAN FAMILY INS. CO.
Cite as 306 Neb. 928necessarily spent” for replacement cost. 1 The ninth policy
had an endorsement which covered actual cash value only. In
damages estimates for claims under these policies, American
Family defined actual cash value as “the cost to repair or
replace a damaged item with an item of like kind and quality,
less depreciation,” and replacement cost as “the cost to repair
the damaged item with an item of like kind and quality, without
deduction for depreciation.”
The homeowners purportedly assigned their proceeds under
the insurance policies to Valley Boys, a roofing company,
which submitted the claims to American Family. American
Family’s catastrophe adjusters inspected the properties and
prepared initial damages estimates for each property. Based
on these estimates, American Family paid the homeowners the
actual cash value of their losses, which the homeowners then
paid to Valley Boys. Under the insurance policies issued by
American Family, the replacement costs would be paid only
after the work was completed and final invoices were received.
The policies further required the work to be completed within
1 year of the date of the loss.
Valley Boys sought to expand the scope of work origi-
nally approved by American Family by submitting requests for
acknowledgment of coverage for additional damage (RAAD’s).
The RAAD’s listed descriptions of repair work Valley Boys
recommended be done at the properties but did not provide
itemized prices or a total price for such work. The cover let-
ter to the RAAD’s stated that if Valley Boys did not receive a
response within 5 business days, “we will be forced to begin
necessary repairs and/or replacement in order to prevent fur-
ther damage to the insured’s premises.” American Family did
not agree to the RAAD’s, and Valley Boys did not complete
that work.
With respect to the initial scope of work based on American
Family’s estimates, Valley Boys submitted invoices of work
1
See D & S Realty v. Markel Ins. Co., 284 Neb. 1, 816 N.W.2d 1 (2012)
(discussing actual cash value and replacement cost coverage).
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VALLEY BOYS v. AMERICAN FAMILY INS. CO.
Cite as 306 Neb. 928completed at the properties and demanded payment of the
withheld depreciation. The invoices list descriptions of com-
pleted work and provide a total price without price itemization.
American Family issued supplemental payments for some of
Valley Boys’ requests, but declined to cover other requests,
contending that no proceeds were due.
In April 2015, Valley Boys, as assignee, filed suit against
American Family for failing to pay the full amount of repair
and/or replacement costs due under the policies. Valley Boys
requested a judgment for damages in the amount of $83,746.73
and stated its damages would likely increase with further
investigation. In its answer, American Family affirmatively
alleged that Valley Boys lacked standing to bring the claims
that it brought.
In April 2017, American Family moved for summary judg-
ment, contending that Valley Boys is not the real party in
interest, because the assignments between the homeowners
and Valley Boys were invalid. American Family argued that
due to a lack of agreement on key terms, such as scope of
work and price, the assignment contracts were unenforceable.
American Family further argued that the assignments con-
flicted with language in the endorsement which limits repair
or replacement costs to those which are actually and necessar-
ily spent.
Following a hearing, the court entered a written order deny-
ing American Family’s motion. In its order, the court first
rejected Valley Boys’ argument that American Family lacked
standing to challenge the assignments pursuant to Marcuzzo
v. Bank of the West. 2 The court found that American Family
had standing to argue the invalidity of the assignments on the
theory that the assignment contracts altered American Family’s
obligations under the insurance policies. The court then exam-
ined the contractual language at issue and ultimately deter-
mined there were triable issues of fact.
2
Marcuzzo v. Bank of the West, 290 Neb. 809, 862 N.W.2d 281 (2015).
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Nebraska Supreme Court Advance Sheets
306 Nebraska Reports
VALLEY BOYS v. AMERICAN FAMILY INS. CO.
Cite as 306 Neb. 928The record indicates that Valley Boys and the homeowner
insureds signed a document titled “Assignment of Insurance
Claim.” The assignments, which all contain the same language,
incorporate a contract by reference. The assignments provide:
[I]n consideration of performing the work pursuant to
the contract executed by [homeowners] and Valley Boys,
as well as any change orders executed thereafter, and
for other good and valuable consideration, [homeowners]
hereby transfer, assign and set over onto Valley Boys, all
of the right, title and interest [in] insurance claim(s) . . .
covering loss sustained at the property . . . including but
not limited to any and all insurance claims asserted there-
under and proceeds thereof.
Eight of the nine homeowner insureds contemporaneously
signed a “Customer Service Agreement” (CSA). Under the
terms and conditions of the CSA, the “Job Price” section states
that Valley Boys will “provide material and labor services to
the above described property within the scope of repairs and/or
replacement to be submitted to the insurance company.” That
section also states, “Due to the unique nature of repairs related
to insurance claims, this contract may not include an explicit
price because the final scope of repairs and/or replacement
arising from the Claim has not yet been agreed upon with the
insurer,” and “Valley Boys agrees to use customary industry
pricing for the work, including general contractor markup at
customary industry rates.” It further states, “Valley Boys’ per-
formance under this agreement is contingent upon Valley Boys
reaching agreement with the insurance company on the scope
of repairs and/or replacement.”
The “Scope of Work” provision of the CSA provides that
“Valley Boys shall provide Customer with roofing and general
contracting services, including labor and materials, as outlined
in Exhibit A (the “Services”). Exhibit A sets forth the Services
that Valley Boys shall provide Customer under Customer’s
insurance claim(s).” (Emphasis supplied.) The provision also
states, “Valley Boys will not perform and is not liable to
perform any Services except those identified in Exhibit A,
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VALLEY BOYS v. AMERICAN FAMILY INS. CO.
Cite as 306 Neb. 928unless otherwise stated herein.” Valley Boys reserved the right
to not perform the work specified in “Exhibit A” if it deter-
mined the work was not “professionally necessary and/or appli-
cable at the time of the work.” However, no “Exhibit A” was
attached to any CSA herein, and there is no evidence either the
homeowners or American Family ever received any documents
labeled “Exhibit A.”
The court found that because American Family had not
fully denied any of the claims, there existed genuine issues of
material fact regarding whether the parties, through subsequent
conduct, established a definite agreement on scope of work
and price.
Lastly, the court considered American Family’s argument
that the assignments materially changed its obligations under
the insurance policies. Under the “Loss Value Determination”
conditions of the endorsement found in eight of the policies, a
section which concerns replacement costs states:
Buildings insured at 100% of replacement cost will be
settled at replacement cost, subject to the following:
....
. . . [W]e will pay the cost to repair the damaged por-
tion or replace the damaged building, provided repairs
to the damaged portion or replacement of the damaged
building are completed, but not exceeding . . . .
....
. . . the amount actually and necessarily spent for repair
of the damaged portion or replacement of the damaged
building[.]
American Family argued that the undefined “actually and
necessarily spent” language limits the replacement costs it
must pay. The court found this argument went to the issue of
the agreed-upon scope of work, raising a question of fact for
the jury.
American Family then filed an offer to confess judgment
in the amount of $20,000, which offer was not accepted. At
trial, American Family moved for a directed verdict based on
the invalidity of the assignments, which the court overruled.
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Nebraska Supreme Court Advance Sheets
306 Nebraska Reports
VALLEY BOYS v. AMERICAN FAMILY INS. CO.
Cite as 306 Neb. 928Following a 4-day trial, the jury returned a verdict in favor of
Valley Boys in the amount of $62,841.06.
American Family moved for judgment notwithstanding the
verdict (JNOV), arguing that the assignments were indefinite,
lacked consideration, and modified the insurer’s obligations.
The court granted the motion as to the claims based on the
eight assignments which incorporated a CSA, and it entered
judgment in favor of Valley Boys for $1,586.07 in damages for
the remaining claim.
In its posttrial order, the court considered the language
of the assignments which states that they were provided “in
consideration of performing the work pursuant to the contract
executed by [homeowners] and Valley Boys.” The court found
that each assignment incorporated a CSA by reference and
read each assignment and CSA together as a whole. The court
returned to the CSA language which states that “Exhibit A”
defines the scope of work. The court noted that the owner of
Valley Boys acknowledged in his trial testimony that no CSA
herein contained an “Exhibit A.” He testified that “Exhibit A”
refers to RAAD’s and invoices, but conceded that these docu-
ments are not titled “Exhibit A.”
The court found that the record showed no agreement on
scope of work or price and that as a result, the assignments
were unenforceable due to lack of consideration. The court also
found that even if Valley Boys and the homeowners had agreed
upon an “Exhibit A” outlining the scope of work, under the
CSA, Valley Boys retained the option to unilaterally determine
that it would not perform any item in the agreed-upon scope
of work. Consequently, the court ruled that each assignment
and CSA was illusory and entered JNOV in favor of American
Family with respect to eight of the claims.
The court entered judgment in favor of Valley Boys on the
ninth claim, because that claim was based on a “StraightForward
Pricing” agreement rather than a CSA. The pricing agree-
ment included an agreed-upon scope of work regarding com-
pleted shingle replacement work, with itemized pricing and
a total price of $2,828. The court found Valley Boys should
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Nebraska Supreme Court Advance Sheets
306 Nebraska Reports
VALLEY BOYS v. AMERICAN FAMILY INS. CO.
Cite as 306 Neb. 928recover for the work listed in the pricing agreement. The court
subtracted the amount paid by American Family based on its
estimate, $1,241.93, and awarded Valley Boys $1,241.93 for
the ninth claim. Valley Boys appealed, and American Family
cross-appealed. We moved this case to our docket on our
own motion.
ASSIGNMENTS OF ERROR
Valley Boys assigns, restated, that the district court erred
in (1) finding that American Family had standing to chal-
lenge the assignments and (2) concluding that the assignments
were invalid.
American Family filed a cross-appeal which argues that if
we reverse based on the reasoning of the district court, we
should affirm on alternate grounds, because the assignments
altered American Family’s duties under the insurance policies.
STANDARD OF REVIEW
[1,2] Whether a party who commences an action has stand-
ing and is therefore the real party in interest presents a jurisdic-
tional issue. 3 When a jurisdictional question does not involve
a factual dispute, determination of a jurisdictional issue is a
matter of law which requires an appellate court to reach a con-
clusion independent from the trial court’s; however, when a
determination rests on factual findings, a trial court’s decision
on the issue will be upheld unless the factual findings concern-
ing jurisdiction are clearly incorrect. 4
[3-5] Review of a ruling on a motion for JNOV is de
novo on the record. 5 To sustain a motion for JNOV, the court
resolves the controversy as a matter of law and may do so only
3
Jacobs Engr. Group v. ConAgra Foods, 301 Neb. 38, 917 N.W.2d 435(2018), citing Countryside Co-op v. Harry A. Koch Co., 280 Neb. 795, 790
N.W.2d 873 (2010), disapproved on other grounds, Weyh v. Gottsch, 303
Neb. 280, 929 N.W.2d 40 (2019).
4
Western Ethanol Co. v. Midwest Renewable Energy, 305 Neb. 1, 938
N.W.2d 329 (2020).
5
LeRette v. Howard, 300 Neb. 128, 912 N.W.2d 706 (2018).
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VALLEY BOYS v. AMERICAN FAMILY INS. CO.
Cite as 306 Neb. 928when the facts are such that reasonable minds can draw but
one conclusion. 6 On a motion for JNOV, the moving party
is deemed to have admitted as true all the relevant evidence
admitted that is favorable to the party against whom the motion
is directed, and, further, the party against whom the motion
is directed is entitled to the benefit of all proper inferences
deducible from the relevant evidence. 7
[6] The construction of a contract is a matter of law, in
connection with which an appellate court has an obligation to
reach an independent, correct conclusion irrespective of the
determinations made by the court below. 8
ANALYSIS
American Family Had Standing
to Challenge Assignments
Valley Boys argues that under our holding in Marcuzzo, 9
American Family lacks standing to challenge the validity of
the assignments, because American Family is not a party to
the assignments. In contrast, American Family argues that the
terms of the assignments altered its obligations under the insur-
ance policies and that as a result, it has standing to challenge
the validity of the assignments.
[7] An assignment is a contract between the assignor and the
assignee, and is interpreted or construed according to the rules
of contract construction. 10 Nebraska law states that only a party
(actual or alleged) to a contract can challenge its validity. 11
In Marcuzzo, in the context of a mortgage assignment,
we held that a borrower who alleges that an assignment is
6
Facilities Cost Mgmt. Group v. Otoe Cty. Sch. Dist., 298 Neb. 777, 906
N.W.2d 1 (2018).
7
Id.8
Acklie v. Greater Omaha Packing Co., ante p. 108, 944 N.W.2d 297(2020).
9
Marcuzzo, supra note 2.
10
Western Ethanol Co., supra note 4.
11
Id.
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Nebraska Supreme Court Advance Sheets
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VALLEY BOYS v. AMERICAN FAMILY INS. CO.
Cite as 306 Neb. 928voidable, and who is not a party to a mortgage assignment or
a third-party beneficiary of the assignment, lacks standing to
challenge the assignment. 12 In that case, the borrower asserted
that the wrong entity signed the assignment paperwork, an
issue which we determined would not affect the validity of the
assignment but would merely make the assignment voidable at
the election of a party to the assignment. 13
[8] Recently, however, this court discussed the recognized
exception to the rule in Marcuzzo. 14 A debtor has standing to
challenge an assignment if it can show actual prejudice by the
improper assignment, an injury that is directly traceable to the
assignment, such as being at risk for paying the same debt
twice, or by otherwise showing that the assignment is invalid,
ineffective, or void. 15 In Western Ethanol Co. v. Midwest
Renewable Energy, 16 we held that a debtor had standing to
challenge the assignment of a judgment based on the conten-
tion that the debtor was at risk of paying the same debt twice.
Here, American Family contends that it can show an injury that
is directly traceable to the assignment.
Generally, all contract rights may be assigned, unless the
assignment would materially change the duty of the obligor
or materially increase the obligor’s burden or risk under the
contract. 17 An assignment does not affect or change any of
the provisions of the contract. 18 The assignee of a chose in
action acquires no greater rights than those of the assignor,
and takes it subject to all the defenses existent at the time. 19 A
12
See Marcuzzo, supra note 2.
13
See id.
14
See Western Ethanol Co., supra note 4.
15
Id.
16
Id.
17
29 Richard A. Lord, A Treatise on the Law of Contracts by Samuel
Williston § 74:10 (4th ed. 2003 & Supp. 2020); 3 Restatement (Second) of
Contracts § 317(2) (1981).
18
Kasel v. Union Pacific RR. Co., 291 Neb. 226, 865 N.W.2d 734 (2015).
19
Western Ethanol Co., supra note 4.
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Nebraska Supreme Court Advance Sheets
306 Nebraska Reports
VALLEY BOYS v. AMERICAN FAMILY INS. CO.
Cite as 306 Neb. 928postloss assignment of insurance proceeds is allowed because
it is essentially an assignment of a chose in action against the
insurer; but such an assignment neither increases nor changes
the insurer’s obligations under the policy. 20
Although not controlling here, subsequent to the events in
this case, the Legislature enacted Neb. Rev. Stat. § 44-8605(Cum. Supp. 2018), which sets forth requirements for postloss
assignments of rights under insurance policies.
Under the policies in this case, American Family acknowl-
edges that it had an obligation to pay the replacement costs to
repair the hail damage due upon the completion of the work
and the receipt of invoices for the work. However, under the
assignments, Valley Boys demanded payment for work that
either was not agreed to by the parties or was not completed. As
a result, the assignments altered American Family’s obligations
and created the risk that American Family would pay more
than what it was obligated to pay, resulting in an injury that
is directly traceable to the assignment. Therefore, American
Family has standing to challenge the assignments.
The district court correctly found that American Family has
standing to argue that the assignments between the homeown-
ers and Valley Boys are invalid.
Valley Boys Not Real
Party in Interest
Valley Boys argues the district court erred in determining
that eight of the assignments were invalid and that Valley
Boys is not the real party in interest with respect to the claims
based on those assignments. Valley Boys further argues that
the district court erred in not finding that the terms of the
assignments, the repair work, and the handling of the insurance
claims provide sufficient consideration.
[9,10] Nebraska’s real party in interest statute provides that
“[e]very action shall be prosecuted in the name of the real
20
See Millard Gutter Co. v. Farm Bureau Prop. & Cas. Ins. Co., 295 Neb.
419, 889 N.W.2d 596 (2016).
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VALLEY BOYS v. AMERICAN FAMILY INS. CO.
Cite as 306 Neb. 928party in interest . . . .” 21 The purpose of that section is to pre-
vent the prosecution of actions by persons who have no right,
title, or interest in the cause. 22 The focus of the real party in
interest inquiry is whether the party has standing to sue due to
some real interest in the cause of action, or a legal or equitable
right, title, or interest in the subject matter of controversy. 23 If
there has been a valid and complete assignment of rights, then
the assignee is the real party in interest. 24 If an assignment
is invalid, then the purported assignor remains the real party
in interest. 25
[11,12] The question of whether a party who commences
an action has standing and is therefore the real party in inter-
est is jurisdictional. 26 If a motion challenging a court’s subject
matter jurisdiction is filed after the pleadings stage, and the
court holds an evidentiary hearing and reviews evidence out-
side the pleadings, it is considered a “factual challenge.” 27 The
party opposing the motion must then offer affidavits or other
relevant evidence to support its burden of establishing subject
matter jurisdiction. 28 Where the trial court’s decision on subject
matter jurisdiction is based on a factual challenge, the court’s
factual findings are reviewed under the clearly erroneous stan-
dard. 29 But aside from any factual findings, the trial court’s
21
Neb. Rev. Stat. § 25-301 (Reissue 2016).
22
Jacobs Engr. Group, supra note 3.
23
Id.
24
See, Western Ethanol Co., supra note 4; Millard Gutter Co., supra note
20; Archer v. Musick, 147 Neb. 1018, 25 N.W.2d 908 (1947); John P.
Lenich, Nebraska Civil Procedure § 6:4 (2020).
25
See, Earth Science Labs. v. Adkins & Wondra, P.C., 246 Neb. 798, 523
N.W.2d 254 (1994); Lenich, supra note 24.
26
Jacobs Engr. Group, supra note 3.
27
Id., citing Washington v. Conley, 273 Neb. 908, 734 N.W.2d 306 (2007).
28
Id.29
Western Ethanol Co., supra note 4.
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VALLEY BOYS v. AMERICAN FAMILY INS. CO.
Cite as 306 Neb. 928r­ uling on subject matter jurisdiction is reviewed de novo,
because it presents a question of law. 30
Here, American Family challenged Valley Boys’ standing in
its answer, motion for summary judgment, motion for directed
verdict, and motion for JNOV. In considering American
Family’s motion for JNOV, the court received the entire trial
record and determined that Valley Boys lacked standing with
respect to eight of the assignments.
Valley Boys contends that the district court erred, because
postloss assignments are a well-entrenched principle of
Nebraska law and therefore Valley Boys was the real party in
interest. In Millard Gutter Co. v. Farm Bureau Prop. & Cas.
Ins. Co., 31 we held that as a general principle, a clause in an
insurance policy restricting assignment does not in any way
limit the policyholder’s power to make an assignment of the
rights under the policy—consisting of the right to receive the
proceeds of the policy—after a loss has occurred. However,
American Family has not argued that the insurance policies or
Nebraska law prohibits the homeowner insureds from assigning
their postloss insurance proceeds. Rather, American Family’s
challenge to the assignments concerns general contract prin-
ciples. American Family contends, as the district court found,
that the assignments are invalid because they are indefinite and
lack consideration.
[13-15] A contract written in clear and unambiguous lan-
guage is not subject to interpretation or construction and must
be enforced according to its terms. 32 The court must accord
clear terms their plain and ordinary meaning as an ordinary
or reasonable person would understand them. 33 Instruments
30
Id.31
Millard Gutter Co., supra note 20.
32
City of Sidney v. Municipal Energy Agency of Neb., 301 Neb. 147, 917
N.W.2d 826 (2018).
33
Ray Anderson, Inc. v. Buck’s, Inc., 300 Neb. 434, 915 N.W.2d 36 (2018).
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306 Nebraska Reports
VALLEY BOYS v. AMERICAN FAMILY INS. CO.
Cite as 306 Neb. 928made in reference to and as part of the same transaction are to
be considered and construed together. 34
[16-19] A party seeking to enforce a contract has the burden
of establishing the existence of a valid, legally enforceable
contract. 35 It is a fundamental rule that in order to be bind-
ing, an agreement must be definite and certain as to the terms
and requirements. 36 Generally, mutuality of obligation is an
essential element of every enforceable contract and consists in
the obligation on each party to do, or permit something to be
done, in consideration of the act or promise of the other. 37 An
agreement which depends upon the wish, will, or pleasure of
one of the parties is illusory and does not constitute an enforce-
able promise. 38
In its order disposing of American Family’s motion for
summary judgment, the district court found that each assign-
ment which incorporated a CSA contained no definite agree-
ment on scope of work or price. Nevertheless, the court
overruled the motion to give Valley Boys the opportunity to
present evidence at trial that the parties through their sub-
sequent actions came to an enforceable agreement. 39 After
reviewing American Family’s motion for JNOV with the ben-
efit of all of the evidence admitted at trial, the court found
the evidence showed that each assignment and CSA left scope
34
Id.35
Houghton v. Big Red Keno, 254 Neb. 81, 574 N.W.2d 494 (1998).
36
Davco Realty Co. v. Picnic Foods, Inc., 198 Neb. 193, 252 N.W.2d 142(1977).
37
Johnson Lakes Dev. v. Central Neb. Pub. Power, 254 Neb. 418, 576
N.W.2d 806 (1998).
38
Acklie, supra note 8.
39
See, Nebraska Nutrients v. Shepherd, 261 Neb. 723, 626 N.W.2d 472(2001), abrogated in part on other grounds, Sutton v. Killham, 285 Neb. 1,
825 N.W.2d 188 (2013); MBH v. John Otte Oil & Propane, 15 Neb. App.
341, 727 N.W.2d 238 (2007) (unenforceable agreement may then become
enforceable when missing term is subsequently supplied by parties).
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Cite as 306 Neb. 928of work and price to be determined in the future and that no
binding agreement had been reached.
A review of the framework of insurance coverage in this
case shows that “scope of work” and “price” are vital terms.
The primary dispute was the amount of replacement costs due.
Actual cash value is the value of the property in its depreci-
ated condition. 40 The purpose of actual cash value coverage is
indemnification to make the insured whole, not to benefit the
insured because the loss occurred. 41 Unlike standard indemnity,
replacement cost coverage places the insured in a better posi-
tion than he or she was in before the loss. In essence, replace-
ment cost coverage insures against the expected depreciation
of the property. 42
Here, the homeowner policies required work to be com-
pleted prior to recovery of replacement costs and within 1 year
from the date of loss. If the insured repairs or replaces the
property within the time period stated in the policy, the insured
will then be entitled to an additional payment for the amount
by which the cost of the repair or replacement exceeded the
actual cash value payment. 43
However, under the assignment contracts, scope of work and
price were left to be determined in the future, and no agreement
ultimately was reached. As set forth in the CSA, Valley Boys’
promise to perform was conditioned upon “reaching agreement
with the insurance company on the scope of repairs and/or
replacement.” However, Valley Boys never reached an agree-
ment with American Family regarding the scope of repairs and
replacement and therefore could not reach an agreement with
the homeowners regarding the scope of work.
As pointed out, the CSA required Valley Boys’ scope of
work to be set forth in an “Exhibit A” but no “Exhibit A” can
be found in our record. Valley Boys asserted that the RAAD’s
40
D & S Realty, supra note 1.
41
Id.
42
Id.
43
Id.
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Cite as 306 Neb. 928and invoices constituted the scope of work and resolved the
insufficiencies of the assignment contracts. However, the
record does not show that the RAAD’s and invoices were
ever sent to the homeowners. Additionally, there is no proof
that Valley Boys agreed to perform the work described in the
RAAD’s or that the homeowners agreed to pay for any such
work. In addition, the RAAD’s included no itemized prices
for work or materials, and no total price, making the RAAD’s
vague and unenforceable.
Moreover, even if there were an “Exhibit A,” the “Scope
of Work” provision granted Valley Boys the unilateral right
to decline to perform work specified in “Exhibit A” which it
deemed unnecessary. The record indicates that the contract
was drafted in a manner to protect Valley Boys from insurance
company coverage denials or price disagreements.
[20] Where the promisor retains an unlimited right to decide
later the nature or extent of his or her performance, the promise
is too indefinite for legal enforcement. 44 As such, the assign-
ments which incorporated a CSA failed to set forth a sufficient
scope of work, permitting Valley Boys unlimited discretion as
to what work to perform, and are therefore unenforceable as a
matter of law.
With respect to price, Valley Boys argues the assignments
themselves mutually acknowledged the receipt and sufficiency
of good and valuable consideration. Nonetheless, the CSA
makes clear that at the time of its execution, it did “not include
an explicit price because the final scope of repairs and/or
replacement arising from the Claim has not yet been agreed
upon with the insurer.” The record at trial showed no subse-
quent agreement as to price ever came to fruition.
[21,22] An assignment is effective only when supported
by valid consideration. 45 “‘[A] mere pretense of bargain does
not suffice, as where there is a false recital of consideration
or where the purported consideration is merely nominal. In
44
Acklie, supra note 8.
45
Ehlers v. Perry, 242 Neb. 208, 494 N.W.2d 325 (1993).
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Cite as 306 Neb. 928such cases there is no consideration . . . .’” 46 Mutual promises
may constitute consideration if they are given in exchange
for each other and are equally obligatory on the parties so
that each may have an action thereon. 47 Mutuality is absent
when only one of the contracting parties is bound to perform,
and the rights of the parties exist at the option of one only. 48
Without a mutuality of obligation, the agreement lacks con-
sideration and, accordingly, does not constitute an enforce-
able agreement. 49
Valley Boys claimed that the issue of price was satisfied
by Valley Boys’ obligation to use customary industry pricing.
Additionally, Valley Boys contends that when it provided esti-
mates in the invoices using “Xactimate,” a computer software
which estimates the scope of loss, pricing was established.
A supervisor of catastrophe adjusters for American Family
testified that Xactimate is one tool that American Family
uses to estimate loss, in addition to industry guidelines and
an adjuster’s experience. She testified that without itemized
pricing, she could not interpret Valley Boys’ requests in the
invoices. Valley Boys’ expert witness admitted that if two
experienced adjusters looked at the same house and used
Xactimate, they would come up with different numbers due to
the human input that goes into estimates.
The record before us makes clear that Valley Boys never
reached an agreement with American Family regarding the
scope of repairs and replacement and that therefore, Valley
Boys never reached an agreement with the homeowners as
to price. As such, the assignments which incorporated a CSA
failed to set forth a sufficient price and are therefore unen-
forceable as a matter of law.
46
Irwin v. West Gate Bank, 288 Neb. 353, 360, 848 N.W.2d 605, 610 (2014),
quoting Restatement (Second) of Contracts § 71, comment b. (1981).
47
See De Los Santos v. Great Western Sugar Co., 217 Neb. 282, 348 N.W.2d
842 (1984).
48
Johnson Lakes Dev., supra note 37.
49
Acklie, supra note 8.
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Cite as 306 Neb. 928Pursuant to our obligation to reach an independent correct
conclusion irrespective of the determinations made by the court
below, when the language of each assignment and CSA is con-
strued together as a whole, and considered in the context of the
evidence presented at trial, we conclude that there was no defi-
nite, mutual agreement between the homeowner insureds and
Valley Boys. As a result, no right to collect postloss insurance
proceeds passed to Valley Boys under the assignments and
Valley Boys is not the real party in interest for those claims.
Because we determine that the assignments are unenforce-
able under general contract principles, and because American
Family’s cross-appeal asserts only an alternative basis for
affirming and does not challenge the ninth claim, we need not
address American Family’s cross-appeal.
CONCLUSION
For the foregoing reasons, the judgment of the district court
is affirmed.
Affirmed.